News

At its recent meeting, FHLBank Topeka’s Board of Directors approved changes to its Member Products Policy. Details are available in the online Member Products and Services Guide (MPSG). Policy changes become effective Jan. 1 and lending values for collateral reported via the Qualifying Collateral Determination (QCD) form will be effective with the filing of the Mar. 31, 2016, QCD form.

Schedule of Eligible Collateral Changes That Apply to All Members

All Types of Mortgages – Subsequent assignments to a mortgage and/or deed of trust must show evidence of proper recording with the recorder’s office.

Held-for-Sale (HFS) Mortgages on 1-4 Residential Real Property – A new collateral category was created for these types of loans. The category is broken down into the following subcategories, HFS mortgages eligible to be sold to FNMA, FHLMC or GNMA and HFS mortgages not eligible to be sold to FNMA, FHLMC or GNMA.

HFS Underwriting Requirements - The following underwriting requirements for HFS mortgages should be noted. The full list of underwriting requirements can be accessed in the MPSG.

HFS Single Family mortgages eligible to be sold to FNMA, FHLMC or GNMA

• Pipeline Limitations – Blanket Pledge members’ (excluding Community Development Financial Institutions (CDFI)) loans cannot exceed 90 days from the origination date. Specific Pledge members’ and CDFIs’ loans cannot exceed 45 days from origination date.
• Loans must comply with FNMA, FHLMC or GNMA’s underwriting guideline.
• Loans eligible to be sold to FNMA or FHLMC must be underwritten using Desktop Underwriter® (DU) or Loan Prospector®(LP) and the documentation must be maintained that reflects a DU Approve/Eligible or an LP Accept/Eligible.
• Loans eligible to be sold to GNMA must be underwritten using Technology Open To Approved Lenders (TOTAL) Mortgage Scorecard and documentation must be maintained that reflects a TOTAL Scorecard Accept or Refer (any Refer must also include the Direct Endorsement underwriter’s approval).
• Loans cannot be more than 30 days delinquent.

HFS Single Family mortgage not eligible to be sold to FNMA, FHLMC or GNMA

• Only eligible to be pledged by Blanket Pledge members (excluding CDFIs).
• Pipeline Limitations – Blanket Pledge members’ (excluding CDFIs) loans cannot exceed 90 days from the origination date.

With the creation of the new asset category, HFS loans can no longer be reported under the conventional, FHA-insured or VA-guaranteed mortgage asset category.

HFS Lending Values: The following lending values for HFS mortgages are as follows:

Collateral Fees on Held-for-Sale Mortgages – A daily pricing fee of $0.90 per loan will be charged on HFS mortgages on one-to-four family residential real property safekept by the FHLBank or an FHLBank-approved third party custodian and priced by FHLBank’s third-party vendor (required for members reporting collateral under the Delivered (Expanded) Lending Value, which includes Specific Pledge members, CDFIs, and Housing Associates). HFS mortgages will not be charged the usual collateral fees of $4.00 per loan for initial review or release and monthly maintenance fees $0.25 per loan. In addition, this HFS fee will not apply to Blanket Pledge members (excluding CDFIs) that have not been required to deliver its assets to the FHLBank or an FHLBank-approved third-party custodian.

Rehabilitation Loans – Rehabilitation loans should only be reported under the residential, multifamily or commercial construction mortgage categories.

Multifamily Residential Loans and Commercial Loans – Blanket Pledge members (excluding CDFIs) pledging these types of loans must maintain a debt service coverage ratio of 1.00 or greater.

Securities Ratings Organizations – FHLBank recognizes ratings on pledged securities from the following Nationally Recognized Rating Organizations (NRSROs): Standard & Poor’s Financial Services LLC; Moody’s Investor’s Service, Inc. or Fitch Ratings Inc. The lowest rating identified will be applied to the security being pledged.

Agency CMOs and Other Agency CMOs – Securities identified as inverse floaters, subordinated or junior security classes should be reported under the Other Agency CMO category instead of the Agency CMO category.

Commercial Mortgage Backed Securities (CMBS), Less than 100% Defeased with Certain Underlying Collateral – A new collateral category was added for CMBS that are less than 100% defeased and have underlying cash flows from multifamily residential real property or collateral under Category IV (including support, inverse floaters and mezzanine tranches within a non-subordinated class). The lending value on these types of securities is 83% and 79%of the market value of the securities for AAA- and AA-rated securities, respectively. In addition, the maximum lending value on any single asset/single borrower CMBS is limited to $50 million.

Commercial Real Estate (CRE) Loans on Special Purpose Properties – CRE loans secured by a Special Purpose Property are not considered eligible collateral for Specific Pledge members, CDFIs or Housing Associates. Special Purpose Property is defined as properties that have a limited market with a unique physical design, special construction materials or a special purpose layout that restricts its utility to the use for which it was built. Such property has relatively few potential buyers at a particular time, and the property cannot be converted to another use without a large capital investment.

Policy Changes That Only Apply to Captive Insurance Companies

Captive Insurance Companies are permitted to be members of the FHLBank System. The following changes to the policy impact such members.

The parent of a captive insurance company member must execute an irrevocable and unconditional guarantee for prompt and complete payment and performance by the captive of any and all existing and future indebtedness in order for captive insurance company to access credit from the FHLBank. To maintain the captive insurance company’s access to credit, the parent must adhere to the following requirements, unless prior written approval has been granted by FHLBank senior management:

• Mortgage Company Sponsored Captive Insurance Company
•         Core Capital (Net Worth) is at least $100 million;
•         Core Capital (Net Worth) to Total Tangible Assets Ratio is greater than 6.50%;
•         Total Debt to Core Capital (Leverage) Ratio is less than 10 times; and
•         Unrestricted cash or cash equivalents is greater than 2.0% to Total Assets.
• Non-Mortgage Company Sponsored Captive Insurance Company
•         Minimum Tangible Net Worth is at least $100 million;
•         Core Capital (Net Worth) to Total Tangible Assets Ratio is greater than 5.00%;
•         Total Debt to Core Capital (Leverage) Ratio is less than 8 times; and
•         Unrestricted cash or cash equivalents is greater than 1.0% to Total Assets.

Maximum Term on Credit Obligations for Captive Insurance Companies – The maximum term on credit obligations that can be extended to a captive insurance company without prior written approval by FHLBank senior management is 45 days for Mortgage Company Sponsored and 5 years for Non-Mortgage Company Sponsored Captive Insurance Companies.

Calculation of Maximum Credit Available to Captive Insurance Companies – When calculating the maximum amount of credit available, a captive insurance company may include their assets as well as those assets held at the parent if an unconditional parental guarantee is provided (generally 40% of total assets).

With the creation of the new asset category, HFS loans can no longer be reported under the conventional, FHA-insured or VA-guaranteed mortgage asset category.

If you have any questions about these changes, please contact your regional account manager or the Lending Desk at 800.809.2733.